Indian aviation is set to experience once-in-a-lifetime growth which will see both the domestic and international markets more than doubling in size over the next 5-6 years. Domestic airport passenger numbers could increase from 307 million in FY24 to 600-700 million by FY30, while international traffic could go up from just under 70 million passengers to 140-160 million over the same period.
Meanwhile, the fleet of Indian carriers is similarly expected to double in size to reach around 1,400 aircraft by FY30. In short, the growth that Indian aviation has experienced in the 90+ years since J.R.D. Tata piloted Air India’s first flight, will be replicated in just the next 5-6 years. This is growth at a rate that has rarely been seen in global aviation, with China being perhaps the only comparable precedent. It has the potential to transform Indian aviation—and the Indian economy—provided that we prepare for it appropriately. Attention needs to be given to ensuring that there is an enabling ecosystem in terms of institutional infrastructure, policy, regulation and skills. Developing a pipeline of trained resources across the aviation value chain will be a critical part of India’s growth story.
The scope for global aviation hubs: One of the key opportunities that exists is the development of Indian airports as global hubs. A successful hub requires not only world-class airport infrastructure, but also airlines with the network, fleet, product and vision to compete for connecting traffic. Twenty years ago, India had neither. And then, as a result of the airport modernisation programme, the country’s infrastructure improved beyond recognition. But the best airport in the world cannot be a successful hub without a home carrier that is intent on operating a hub.
In the past couple of years, the second piece of the puzzle is starting to come together. The privatisation of the national carrier has given birth to an Air India that seeks to become a leading global airline with an extensive international network supported by a modern widebody fleet for long- and ultra-long haul operations.
In parallel, IndiGo has been rapidly expanding its short- and medium- haul international network, as a result of which it has been attracting transfer traffic even by default. With the induction of more long-haul narrowbodies, supported now by an order for widebody equipment, IndiGo will increasingly be positioned to actively capture intercontinental traffic flows. CAPA Advisory expects that Indian carriers will operate an additional 150 widebodies by FY35, supplemented by A321XLRs on medium-haul routes.
Between Air India and IndiGo’s complementary business models, they will be able to capture both premium and price-sensitive passengers, by leveraging India’s favourable geography to connect passengers via Indian airports.
Geographical advantage: India’s location is as good, or in some cases even better, than hubs in the Gulf or Asia, to be able to provide competitive routings between Europe, the Middle East and Africa on the one hand, and Asia Pacific on the other. There is a genuine opportunity for 2-3 Indian airports to emerge as leading global hubs, in cooperation with Air India and IndiGo, which are as attractive and competitive as the likes of Dubai, Abu Dhabi, Doha, Singapore or Hong Kong, for example.
The proposition of Indian hubs is further strengthened by the unique stopover experiences that India can offer tourists. Short stopovers can encourage passengers to return for longer visits that will drive the long-term growth of inbound tourism. The Government of India clearly recognises this opportunity and has stated its strategic intent to support the development of hubs. If it can provide the necessary enabling support, we have the foundations for a successful outcome. Although there is a tremendous opportunity underpinned by strong fundamentals, it is also important to be realistic about what can be achieved, and by when. Airport hubs are not built overnight, they take decades of investment and effort. Dubai’s success is the result of an unwavering national commitment to aviation and tourism for the past 20-30 years.
Pivotal role of key stakeholders: India cannot take it for granted that its hubs will succeed. And it cannot be left to airlines and airports alone. Central and state governments need to focus on developing tourism infrastructure, ensuring that the cost base is competitive, offering simplified visa and facilitation processes, developing multi-modal infrastructure, effectively promoting the destination, enabling airlines to trans-ship cargo, investing in airspace efficiency, and making safety and security paramount etc.
Similarly, airports will need to invest in infrastructure and facilities that are attractive to transfer passengers with relatively longer dwell times. Such traffic has different requirements to the origin-destination passengers that Indian airports mostly handle today. This will require a well-thought-through hub development policy. And it may need to be supported by a dedicated fund to incentivise airports that are not in a position to invest in world-class hub and transfer capabilities because of the high revenue share arrangements to which they are committed.
India has a tremendous opportunity to establish itself as a global aviation hub over the next 5-7 years, provided that it pursues this in a structured manner with close coordination between all key stakeholders.
The author is CEO & Director, CAPA India, a specialist aviation, aerospace and travel advisory practice
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